Over the years, Palomar and Tri-City have considered affiliating with these larger players, but neither has pulled the trigger.

Ted Kleiter, chairman of Palomar’s board, said Palomar almost affiliated with Scripps in 1996, but its board ultimately decided against handing over the authority to add and delete services, and even close hospitals, to an outside entity. Kleiter said he thinks Palomar has stayed independent because that’s the way the public wants it.

“The district model is the only one that gives the patients and the public a direct input into how care is provided,” he said. “As near as I can tell, being involved in the community as long as I have, people appreciate that.”

Startup costs

Tri-City board member Julie Nygaard said that she believes remaining an independent keeps Tri-City closely tied to the community it serves.

“We directly represent the people of our district, and we provide what the people in Oceanside and Carlsbad and Vista tell us they need,” Nygaard said.

Still, going it alone has not been easy for these two hospitals this year.

Through the first six months of its fiscal year, Palomar averaged a $4.6 million monthly loss while it spent heavily from reserves on equipment and training to open its new hospital.

Palomar started its fiscal year with $177 million in the bank, but that amount has dropped to $111 million, according to its most recent financial report, which covers July through February.

Robert Hemker, Palomar’s chief financial officer, said in December that he expected losses to decrease as startup costs for the new hospital decline.

Palomar, according to its most recent financial report, lost $7.3 million in October but only $1.3 million in February. Remove the noncash expense of depreciation, and Palomar had a slim positive profit from operations in December.

“The initial ramp-up expenses are now starting to wane away, we’re driving more additional revenue as a result of efficiency processes that we have put in place,” Hemker said.

Accounting problems

Tri-City officials announced at the district’s most recent board meeting that the hospital lost $8 million more than originally reported during the first eight months of its fiscal year.

About $6.5 million of that was due to a miscalculation of the collectability of debts owed to Tri-City by patients unable to pay. An additional $1.5 million came from accounting problems related to salaries.

The accounting changes were a setback to Tri-City, which otherwise had managed to post a $668,546 net income surplus from July through February, despite lower-than-expected patient volumes in October and November.

Anderson, who has brought in a new chief financial officer, said at a recent meeting that he believes the current budget problems are temporary.

“We think we will be in much better shape at the end of the fiscal year than we are now,” Anderson said, adding that new controls recently put in place should help the organization begin pushing back toward the black between now and June.

Ambitious plans

Making a profit is important for Tri-City because it must keep up with Palomar and Scripps Memorial Hospital in Encinitas, which have both spent hundreds of millions of dollars on expansion projects.